Earlier this month, I penned a piece here applauding the Department of Justice's intervention in the Google Book Search case and questioning whether private entities like Google and the Association of American Publishers could be expected to produce a revised settlement that would adequately serve the many public interests that are implicated by their massive book scanning effort. Since then, the parties asked for and were granted a delay in the proceedings, expressing their desire "to work with the DOJ to the fullest extent possible".
The DOJ's objections were legion, using unusually strong language that spelled deep trouble for the settlement. (It's never a good sign when the DOJ notes that features of your settlement look "uncomfortably" like arrangements that are "quintessential per se violations of the Sherman Act." Ouch.)
But those of us who have been following this case closely - from the outside looking in because the parties have kept their negotiating doors closed - are left scratching our heads by the actions taken by Google and its partners since that time. At the court's October 7th Status Conference, the parties boldly promised that a new agreement would be ready within a month (this after the original agreement took years to reach), and then repeatedly made cavalier statements that show they have no real intention of changing the settlement in any substantive way. Eric Schmidt of Google said, "We don't want to change it unless we need to," and Paul Aiken of Authors Guild went even further with, "The basic deal is not changing."
Unless I'm missing something, this is a failure to communicate of Cool Hand Luke proportions. Either Google and the publishers are taking the DOJ's concerns to heart and working hard to change those disturbing Sherman-esque features, or they are rushing to obtain a revision that will bear only cosmetic differences from the original.
The DOJ has been characteristically mum in responding to the parties' confident statements that the new agreement will be both fast and good, but it is instructive to look at the language of the DOJ's brief to understand how high the agency has set the bar for the parties. Meeting DOJ's objections while still salvaging the commercial interests that brought the parties here in the first place will be no easy task.
To understand the enormity of the DOJ's objections, you have to first remember that this is private litigation between Google and the plaintiff publishers - and that the settlement proposed by the parties bears little relation to the facts actually at issue in the case. Google was sued in 2005 by AAP, Authors Guild and others because of Google's efforts to scan protected works without first seeking copyright permission. Google claimed that the exercise was a protected "fair use" under copyright law and vowed to defend against the lawsuit on those grounds. The exercise to which Google was referring, however, was the scanning of protected works in order to display no more than "snippets" to aid in searching. Google claimed that it was essentially creating a digital card catalog. Commentators don't always agree on whether this activity would, in fact, have been a protected fair use, but the sweeping settlement agreement announced by the parties late last year made the entire point moot.
The settlement shocked observers because rather than resolve the more limited search and discovery activities at issue in the original cases, Google instead announced the creation of a massive new business venture that would collect and sell complete digital editions of books. As Mary Beth Peters of the U.S. Copyright Office stated so succinctly at a September congressional hearing, "We realized that the settlement was not really a settlement at all." There is no disagreement that had Google announced in 2004 that it intended to make complete digital copies of protected books and sell them without seeking permission, it would have been laughed out of court. But today Google is asking for the court's blessing on that very business arrangement.
Google has a lot to lose based on the outcome of this litigation; in order for its book digitizing efforts to make business sense, it must secure control over a significant enough swath of rights that it can create a marketable commercial product - and that means it needs the court to endorse its wholesale approach to digitization. Google was not the first entity to attempt to create a digital book collection. The Internet Archive and others were engaged in this endeavor for years before Google arrived on the scene, but they were doing it the old-fashioned (legal) way - by focusing on public domain works and uses that acknowledged copyright guidelines before adding a book to online collections. Google didn't bother to accept such accommodations. Acting out of its own business interests, Google adopted a "scan first, ask questions later" strategy with serious copyright implications. It was this behavior that quickly raised the ire of the plaintiff publishers and triggered the lawsuit. That same set of facts also plays a crucial role in the DOJ's objections.
Issue 1: It's a Fact(o) - De Facto Exclusivity Poses Big Problems for Google
It's an interesting conundrum for the court to consider. Google has now scanned millions upon millions of works, which make up what the settlement refers to as the "research corpus." This is the jewel that Google wants to protect at all costs because control of such a database yields great power not only over the future of digital books but over virtually every field the Internet touches. But the corpus only exists (with Google as its creator) because Google acted in blatant disregard of the law to clear library shelves in order to enter the business of selling books that it didn't even own. And the DOJ is clear in noting that such activity is not to be encouraged in the future, saying, "It would scarcely be sound policy to encourage deliberate copyright violations and additional litigation as a means of obtaining approval for licensing provisions that could not otherwise be negotiated lawfully."
That is why something called "de facto exclusivity" is going to be a big problem for Google in meeting the DOJ's standards for a revised settlement. In essence, antitrust norms require that Google not be the only entity that can benefit commercially from this new database of books. Exclusivity is a bad thing in the world of antitrust law. Google would have you believe that this isn't a problem - "nothing in this agreement precludes any other company or organization from pursuing their own similar effort," says Sergey Brin in his New York Times op ed.
But the DOJ's brief shoots holes in the argument that other competitors could do the same thing as Google has done, noting that the mere theoretical possibility of other market entrants is not enough. Even though Google may not have de jure exclusivity (or exclusivity granted to the company as a matter of law), de facto exclusivity (exclusivity as a matter of fact) may be found if it is wholly unreasonable or undesirable to expect another market entrant to follow Google's same path. And there is no other scenario in which a competitor could amass the same corpus as Google has created without resorting to litigation-inducing tactics. Why? Because the only reason Google now has this massive digital book collection on which the entire settlement hinges is because it obtained it by purposely risking litigation. The settlement offends so many critics because it not only condones but seems to reward this behavior - creating an exclusive set of rules for Google's benefit, and allowing it to profit from improperly-gotten gains. The DOJ's language on exclusivity presents serious problems for Google. DOJ states that exclusivity is a problem; it then says that non-exclusivity cannot hinge on a litigation-wrought path like the one that Google originally took. The only way to legitimately duplicate the database Google has created for its own commercial benefit - absent congressionally directed changes in copyright law - is to seek individual permission from rightsholders.
So how could Google avoid this problem? From a legal perspective, it's fairly simple. They just need to allow competitors to have access to the treasure trove of digital material. But do you really think Google will be willing to do that - to let everyone else have full and equal access to the books? Where's the competitive advantage in that? What I think we can expect to see instead is some clever tap-dancing that tries to convince the court and DOJ that the parties have ameliorated this major concern, without actually making any substantive changes. We'll have to wait and see what they come up with on November 9th.
Next Up...Issue 2: What Are My Opt-ions? Why Opt-In May Sink the Deal
On Deck...Issue 3: Whose Class is This Anyway? Problems with Class Representation